PRAGUE, May 29 (Reuters) - Czech industry output fell by 23.2 percent year-on-year in April, returning to a near record pace of decline after a brief respite in March and dashing economists' hopes of a brighter second quarter.
Analysts had hoped that stimulus measures like a scrap subsidy for cars in the euro zone, central Europe's main trading partner, would help reverse a deep economic slide in the region during first three months of the year.
But the Czechs' April drop overshot the consensus forecast of a drop of 19 percent. Analysts said it showed the contraction was not reversing and it provided a potential argument for the Czech central bank to cut rates from a record-low 1.5 percent.
The figure, a flash estimate with no detailed breakdown, followed a slight easing to a fall of 17 percent in March.
"The hopes for a stabilization of production thanks to higher demand in the auto sector seem to be premature," said Pavel Sobisek, chief economist of Unicredit Prague.
"The stabilization of GDP in the second quarter, after a previous dramatic fall, is a huge question mark now."
The detailed data will be released on June 11.
The Czech crown was virtually flat, held up by a rally across central and Eastern European currencies that were boosted by U.S. and Japanese data showing a pickup in demand.
But the region, a chief producer of cars, consumer electronics, and other high value goods, has lagged the West.
Initially slow to be pulled into the vortex, it has since been sucked into full-blown crisis, with economies shrinking from 3.4 percent in the first quarter in the Czech Republic to 18.0 percent in Latvia.
Only Poland, the European Union's largest ex-communist economy, has escaped contraction. Data also released on Friday showed it grew by 0.8 percent in the first quarter.
Economists say no recovery will take place until strong demand resumes in the United States and Western Europe, although there have been some other bright spots.
Germany's government is handing out cash subsidies to people who scrap old cars and buy new ones, somewhat alleviating pressure on car factories in countries like Slovakia and the Czech Republic, which shut production lines and cut work hours last year in the face of a 25 percent drop in sales.
On Thursday, Volkswagen's
But analysts were still largely pessimistic overall.
"It seems the rest of the (industrial) sector is in deeper recession than we had expected," said Jan Vejmelek, head of economic and strategy research and Czech Komercni Banka.
"It might be an argument for speculation of another interest rate cut." (Reporting by Michael Winfrey, editing by Mike Peacock)